IEEJ © December 2018. All rights reserved.

21 December 2018
The 431st Forum on Research Work

Economic and Energy Outlook of Japan for FY2019
Concerns over a slowdown could shadow stable economic growth.
Energy demand will slightly rebound from this year’s decline
SUEHIRO Shigeru, H. Arimoto, Y. Yorita, N. Aizawa, C. Onda, T. Ohira, Y. Shibata, A. Yanagisawa andK. Ito

Summary of economic and energy outlook [Reference Scenario]
Macro economy and production activity | Growth will continue in FY2019 but willdecelerate slightly
In FY2018, the Japanese economy slows down from the previous fiscal year to a moderate growth rate of 0.9%.
Domestic demand is strong, but foreign demand does not contribute as in the past. In FY2019, the growthrate will be as much as the potential growth rate at 0.8%, reflecting a slowdown in private demand, while
public demand will support the growth, in part because of measures to raise the VAT. Industrial production
will increase at a much slower rate than in FY2017 at slightly less than 1% through FY2019. The trade surplus
shrinks to JPY300 billion in FY2018 due to rises in energy prices but will recover to JPY800 billion in FY2019.
As a result, the changes in the trade balance over the two years will be in line with changes in fossil fuel imports.

Energy supply and demand | Primary energy supply will increase slightly after adecrease in FY2018. CO2 will decrease for its sixth consecutive year, but just a little
Primary energy supply decreases for the first time in two years in FY2018 due to a slowdown from the earlier
higher economic growth and a milder winter compared to a record severe winter in FY2017 (-0.9%). In
particular, oil and natural gas fall sharply. In FY2019, primary energy supply will return to a slight increase dueto the expansion of basic materials production and a return to normal winter temperatures (+0.2%). The trend
from fossil fuels to nuclear and renewable energy continues but will not accelerate in FY2019.
CO2 emissions will be reduced to 1,069 Mt in FY2019, a reduction of -13.5% from FY2013. Although energy
conservation and low-carbonisation progress every year, the degree of low carbon is still inferior to that before
the Great East Japan Earthquake.

Energy sales | In FY2019, electricity and city gas sales will increase, whilst fuel oilsales will decline for a seventh consecutive year
In FY2018, overall electricity sales decline by 1.2%. Lighting services decrease sharply due to factors such as
the impact of temperatures and the spread of residential solar PV power generation, while power services also
decline slightly reflecting a slower growth in production activities on the back of a slowdown in exports. InFY2019, sales both for lighting services and for power services will increase, for an overall increase of 0.6%.
That for lighting services will increase by 0.7% due to advances in electrification of water heating and cooking,despite the continued penetration of energy-efficient equipment. Sales for power services will increase by
0.6% due to the gradual expansion of production activities.
Although the sales of city gas for general industrial use increase in FY2018, total sales decrease for the firsttime in three years due to the influence of the severe winter of the previous fiscal year and the mild winter ofthis fiscal year, as well as the decrease of city gas for electric utility use (-2.3%). In FY2019, sales for industrial
use will be driven by an increase for electric utility due to the operation of a new power plant, the continuous
demand development for general industrial use, and sales for residential use will also return to increase. Theoverall figure will turn upward again, hitting a record high but only slightly higher than in FY2017 (+2.6%).

Economic and Energy Outlook of Japan for FY2019| 1

IEEJ © December 2018. All rights reserved.

Table 1 | Summary of Reference Scenario
Historical

Projection

Year-to-year changes

FY2010 FY2015 FY2016 FY2017 FY2018 FY2019 FY2017 FY2018 FY2019

514.5 466.2
232.3 211.6
Oil (GL)
273.3
86.0
Natural gas (Mt of LNG equiv.)
184.7 190.1
Coal2 (Mt)
Nuclear (TWh)
288.2
9.4
3
111.2 149.0
Renewable electricity (TWh)FIT generation (TWh)
63.9
99.2
Self-sufficiency ratio
20.2% 7.4%(926.6) (837.5)
Electricity sales4 (TWh)39.28 39.91
City gas sales5 (Billion m3)
Fuel oil sales (GL)
196.0 180.5
Energy-related CO2 emissions (Mt)
1,138 1,148(FY2013=100)
92.1
92.9
Crude oil, import, CIF ($/bbl)
8449
LNG, import, CIF ($/MBtu)
11.3
8.7
Steam coal, import, CIF ($/t)
11476
Coking coal, import, CIF ($/t)
175
88Real GDP (JPY2011 trillion)
493.0 517.4
Industrial production (CY2010=100)
99.4
97.5
Balance of trade (JPY trillion)
5.3-1.1
Fossil fuel imports (JPY trillion)
18.1
16.1
Exchange rate (JPY/$)
86.1 120.4
Cooling degree days
560
322
Heating degree days
1,077875

Primary energy supply (Mtoe)1Economy

PricesEnergy2463.0
205.1
88.1
188.0
17.3
150.8
108.7
8.3%
850.5
41.53
176.9
1,128
91.3
487.0
81
111
522.0
98.5
4.0
13.1
108.4
431
966

464.9 460.6 461.6 0.4% -0.9% 0.2%
202.6 194.7 193.5 -1.2% -3.9% -0.6%
85.6
82.3
82.0 -2.8% -3.9% -0.3%
192.2 191.6 191.9 2.2% -0.3% 0.1%
31.3
61.2
65.4 80.8% 95.5% 7.0%
163.8 175.7 183.7 8.6% 7.3% 4.5%
117.5 126.6 134.5 8.2% 7.7% 6.3%
9.5% 11.7% 12.3%
1.2p
2.2p
0.6p
863.2 853.1 858.4 1.5% -1.2% 0.6%
42.48 41.52 42.61 2.3% -2.3% 2.6%
174.7 167.7 166.7 -1.2% -4.0% -0.6%
1,112 1,073 1,069 -1.4% -3.5% -0.4%
90.0
86.8
86.5
..
..
..
57
70
67 19.6% 22.0% -3.8%
8.5
10.9
10.4 20.5% 28.6% -4.2%
102
117
103 26.4% 13.9% -11.9%
146
161
143 31.8% 10.0% -11.0%
531.7 536.2 540.4 1.9% 0.9% 0.8%
102.5 103.4 104.3 4.1% 0.8% 0.9%
2.4
0.3
0.8 -38.6% -88.7% 171%
16.2
19.0
18.6 23.6% 17.0% -2.3%
111.1 111.2 114.8 2.4% 0.2% 3.2%
397489381 -7.7% 23.2% -22.2%
1,071
932 1,019 11.0% -13.0% 9.3%

Notes:
1. Mtoe = 1013 kcal
2. Conversion factors for oil: 9,126 kcal/L; Natural gas: 13,043 kcal/kg; Steam coal: 6,139 kcal/kg; Coking coal: 6,928 kcal/kg until FY2012.
2. Conversion factors for oil: 9,145 kcal/L; Natural gas: 13,016 kcal/kg; Steam coal: 6,203 kcal/kg; Coking coal: 6,877 kcal/kg since FY2013.
3. Including large hydro 30 MW or more. 4. Figures in parentheses are old statistical figures. 5. Conversion factor: 1 m 3 = 10,000 kcal

Fuel oil sales in FY2018 continues to decline for many use, including a decline in naphtha due to periodic
maintenance at petrochemical plants, a decline in the use of oil-fired power plants, and a decline in thedemand for kerosene heating (-4.0%). In FY2019, the sales of naphtha will increase due to fewer periodic
maintenance at ethylene plants. The sales of diesel oil will also increase in response to firm demand. Theincrease, however, will be more than offset by a drop in the operation of oil-fired power plants and a drop in
gasoline sales, the result of continuous improvement in automobile fuel efficiency, marking the seventh
consecutive year of decline (-0.6%).

Renewable power generation | The FIT power generation capacity will reach 73 GW
at the end of FY2019
Regarding FIT power sources, more economical and reasonable promotion measures are pursued with theenforcement of the revised FIT Law in April 2017. The law is expected to be amended to further strengthen
the revocation of accreditation of non-operating projects, however, plants under construction are expected
to be operational, with a FIT capacity of 73 GW by the end of FY2019, including 43 GW for non-residential
solar PV. The amount of electricity generated is 134.5 TWh in FY2019, accounting for 13% of Japan’s total
electricity generation (excluding pumped hydro). On the other hand, in exchange for promoting theintroduction of the system, the burden on consumers is increasing. If all of the 86 GW of approved equipment
as of March 2018 were in operation, the cumulative cost to consumers, including operating and transition

Economic and Energy Outlook of Japan for FY2019| 2IEEJ © December 2018. All rights reserved.

equipment, would be JPY61 trillion in the purchase period, equivalent to boosting electricity rates by
JPY3,500/MWh – 15% for households and 21% for industries.

Topic | The effect of restarting nuclear power plants
We assessed the impact of nuclear power generation on 3Es – economy, energy security and environment. In
the High Case, in which there are five more operating plants than in the Reference Scenario, the amount offossil fuel imports would be reduced by JPY300 billion, the self-sufficiency rate would be improved by 2.1
points, and CO2 emissions would be reduced by 13 Mt. The degree of utilisation of nuclear would greatly
affect 3Es.
Figure 1 | Effect of the nuclear power generation [FY2019, compared with the Reference Scenario]
Real GDP

200 Best Mixed Case

1.2

500-50High Case
35Low Case

Fossil fuel imports spending
0.3-0.4-0.3-1.0

Economic and Energy Outlook of Japan for FY2019-20-6080-52-2.1

Unit cost of electricity

13-13

2.1

4-4-4010.5

12-0.30-1.0-1.50.0

20

0.0-0.5

0.3

0.4

Energy-related CO2 emissions

MtCO2

JPY trillion

0.5

0.8

-0.8

-35

1.1

JPY/kWh

100

169

JPY trillion

TWh150Self-sufficiency rate%point

Nuclear power generation

0.8
0.6
0.4
0.2
0.0
-0.2
-0.4

0.7
0.2

-0.2

| 3
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